World faces food crisis due to Ukraine war, Russian billionaire says

LONDON - A global food crisis looms unless the war in Ukraine is stopped because fertilizer prices are soaring so fast that many farmers can no longer afford soil nutrients, Russian fertilizer and coal billionaire Andrei Melnichenko said on Monday.

Several of Russia's richest businessmen have publicly called for peace since President Vladimir Putin ordered the invasion on Feb. 24, including Mikhail Fridman, Pyotr Aven and Oleg Deripaska. 

The United States and its European allies have cast Putin's invasion as an imperial-style land grab that has so far been poorly executed because Moscow underestimated Ukrainian resistance and Western resolve to punish Russia.

The West has sanctioned Russian businessmen, including European Union sanctions on Melnichenko, frozen state assets and cut off much of the Russian corporate sector from the global economy in an attempt to force Putin to change course.

Putin refuses to. He has called the war a special military operation to rid Ukraine of dangerous nationalists and Nazis.

"The events in Ukraine are truly tragic. We urgently need peace," Melnichenko, 50, who is Russian but was born in Belarus and has a Ukrainian mother, told Reuters in a statement emailed by his spokesman.

"One of the victims of this crisis will be agriculture and food," said Melnichenko, who founded EuroChem, one of Russia's biggest fertilizer producers, which moved to Zug, Switzerland, in 2015, and SUEK, Russia's top coal producer.

Russia's invasion of Ukraine has killed thousands, displaced more than 2 million people, and raised fears of a wider confrontation between Russia and the United States, the world's two biggest nuclear powers.

FOOD WAR?

Putin warned last Thursday that food prices would rise globally due to soaring fertilizer prices if the West created problems for Russia's export of fertilizers - which account for 13 percent of world output.

Russia is a major producer of potash, phosphate and nitrogen-containing fertilizers - major crop and soil nutrients. EuroChem, which produces nitrogen, phosphates and potash, says it is one of the world's top five fertilizer companies.

The war "has already led to soaring prices in fertilizers which are no longer affordable to farmers," Melnichenko said.

He said food supply chains already disrupted by COVID-19 were now even more distressed.

"Now it will lead to even higher food inflation in Europe and likely food shortages in the world’s poorest countries," he said.

Russia's trade and industry ministry told the country's fertilizer producers to temporarily halt exports earlier this month.

PHYSICS STUDENT

Melnichenko, who was just 19 when the Soviet Union collapsed, started out trading foreign currency while a physics student at the prestigious Moscow State University.

A gifted mathematician who once dreamt of becoming a physicist, Melnichenko dropped out of university to dive into the chaotic - and sometimes deadly - world of post-Soviet business.

He founded MDM Bank but in the 1990s was still too minor to take part in the privatizations under President Boris Yeltsin which handed the choicest assets of a former superpower to a group of businessmen who would become known as the oligarchs due to their political and economic clout.

Melnichenko then began buying up often distressed coal and fertilizer assets. His fortune in 2021 was estimated by Forbes to be $18 billion, making him Russia's eighth richest man.

The European Union on Wednesday sanctioned Melnichenko for Russia's invasion. It said his attendance at a Kremlin meeting with Putin and 36 businessmen organized by the Russian Union of Industrialists and Entrepreneurs showed he was "one of the leading businesspersons involved in economic sectors."

Melnichenko "has no relation to the tragic events in Ukraine. He has no political affiliations," his spokesman said.

"To draw a parallel between attending a meeting through membership in a business council, just as dozens of business people from both Russia and Europe have done in the past, and undermining or threatening a country is absurd and nonsensical," the spokesman said, adding Melnichenko will dispute the sanctions.

On March 9, Melnichenko resigned as member of the board and non-executive director in both EuroChem and SUEK, and withdrew as their beneficiary, the spokesman said. EuroChem has production assets in Russia, Lithuania, Belgium, Brazil and Kazakhstan.

Italian police last week seized Melnichenko's yacht - the 143-meter (470-foot) Sailing Yacht A - which has a price tag of 530 million euros ($578 million).

-reuters-

US manufacturers scramble for alternatives as coronavirus cuts Chinese supplies

CHICAGO/NEW YORK - The outbreak of coronavirus in China has forced US-based suppliers to industrial giants such as Caterpillar Inc, Deere & Co and Komatsu Ltd to grapple with a surge in costs to avoid production disruptions.

As the epidemic slows exports from the global manufacturing hub, the higher prices for everything from tubes to metal pieces could further dent earnings of tractor and machinery makers that are already battling with a downturn in America's industrial economy.

China is struggling to get its economy back on track after imposing severe travel restrictions to contain the virus that emerged in the central province of Hubei late last year, which has so far killed over 2,100 in China and spread globally.

Illinois-based Morton Industries is trying to find a domestic source for tooling and fixtures used to shape metal that it previously imported. But limited domestic supply and a rush to secure the supplies that formerly flowed from China have sent prices up as much as 30 percent, said Kevin Baughman, vice president of operations at Morton.

Baughman said the company asked customers to shoulder the higher costs for the components "as we couldn't absorb them."

The increased costs are not limited to the parts these companies make. Shifting sourcing often means buying new tools and spending money to ensure that new parts fit the specifications demanded by equipment makers.

Caterpillar declined to comment, as did Deere, which reports earnings on Friday. Komatsu did not respond to a request for comments.

Executives of half a dozen suppliers told Reuters they are taking measures that include tying up sources outside China and booking air freight - as opposed to normal sea freight - to fly in the available parts and components from China, where roads and ports have been restricted, to ensure they can keep their customers supplied.

Woodridge, Illinois-based Morey Corp expects to face shortages for circuit boards and casting parts next month if the stocks are not replenished.

The electronics manufacturer has reached out to vendors in the United States, but its sourcing director, Tanveer Khan, said the price difference between domestic and Asian suppliers is as much as 30 percent.

EXACERBATING PAIN OF TRADE WAR

Supply disruptions come on the heels of a nearly 2-year-old Sino-US trade war, which inflated the costs of imports of industrial parts and components from China and sapped business confidence, resulting in layoffs and production cuts at manufacturers including Deere and Caterpillar.

Unlike the trade war, the coronavirus impact may be short term. Prices could spike, then decline as supplies improve. The number of newly reported cases in China has fallen in recent days.

But for now, the outbreak is further inflating the costs and the threat of component shortages looms.

A Moline, Illinois-based supplier of Caterpillar and Deere that declined to be named said it is paying 40 percent more to domestic vendors for components that used to come from China - costs it is passing on to customers.

Bill Bachman, chief executive at St. Louis, Missouri-based Bachman Machine Company, said an industrial company had reached out to him for price quotations for metal stampings after facing difficulty in obtaining supplies from China.

While he has done work for this customer for 3 decades, Bachman says he cannot match the Chinese rates.

"Regardless of what they're paying over there, we have to quote what we have to charge here," he said.

'THERE COULD BE SHORTAGES'

In a bid to contain the epidemic, most Chinese provinces had extended the Lunar New Year holiday and kept factories closed until Feb. 10. Many factories have reopened, but are operating at partial capacity.

Meanwhile, Chinese ports are short-staffed. A shortage of truckers is making it difficult to move products from factories to ports.

This has led to higher demand for air cargo. But the capacity is limited and costs are becoming prohibitive.

Evan Poulakidas, director for North America at CCTY Bearing, says his company is ready to fly in products "piece by piece" from its plant in China.

The bigger challenge is how to keep the facility running if the factories of sub-suppliers remain closed. CCTY has informed its customers that stocks on hand would not last beyond April.

"It is not just for our products, but also for other products, there could be shortages," Poulakidas said. 

source: news.abs-cbn.com

Apple moves Mac Pro production to China from US - report

Apple Inc is shifting manufacturing of its new Mac Pro desktop computer to China from the United States, the Wall Street Journal reported on Friday, citing people familiar with the matter.

The move comes at a time when the Trump administration has threatened to impose new levies to cover nearly all imports from China and pressured Apple and other manufacturers to make their products in the United States if they want to avoid tariffs.

Last week, Apple asked its major suppliers to assess the cost implications of moving 15 to 30 percent of their production capacity from China to Southeast Asia, according to a Nikkei report.

"If true, suggests to me that Apple has tremendous confidence that the US and China will be able to solve their trade dispute and do so in the near-future," D.A. Davidson analyst Tom Forte said in an email.

China is a key market for Apple as well as a major production center for its devices. The company got nearly 18 percent of its total revenue from Greater China in the quarter ended March.

Apple's Mac Pro, a $6,000 machine used by creative professionals, has been facing waning demand, the Journal said.

The company does not break out sales numbers for its Mac Pro machines. The desktop is part of the company's Mac line of products, which accounted for less than 10 percent of Apple's total sales in 2018. In 2018, Apple sold about 18 million Mac products, compared with about 218 million iPhones.

"Like all of our products, the new Mac Pro is designed and engineered in California and includes components from several countries including the United States," an Apple spokesman said. "Final assembly is only one part of the manufacturing process."

Apple's decision coincides with the end of tax subsidies that it got for making the desktop in a plant in Texas run by contract manufacturer Flex Ltd, according to the Journal.

"(This) serves as a reminder that, relative to the US, manufacturing in China remains a lower-cost alternative and benefits from an existing infrastructure, versus having to, potentially, rebuild one in the US," Forte said.

The tech giant has tapped contractor Quanta Computer Inc to manufacture the computer and is ramping up production at a factory near Shanghai, the report said.

Quanta did not respond to a request for comment.

Apple's shares were down marginally at $198.69.

source: news.abs-cbn.com